The Meb Faber Show - Better Investing Victor Haghani on Predicting the Market and Disciplined Asset Allocation | #588
Jun 27, 2025
Victor Haghani, Founder and CIO of Elm Wealth, shares his expertise in wealth management with a focus on diversification and tax efficiency. He dives into the 'Crystal Ball Challenge,' highlighting the importance of position sizing over predicting market moves. Haghani discusses disciplined asset allocation, contrasting U.S. and foreign equities, and explores the complexities of market valuation. He emphasizes informed decision-making and shares insights on Roth IRA conversions and the quirky risks of gamification in investing, blending humor with critical financial lessons.
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Future News Doesn't Guarantee Profit
- The "Tomorrow's Newspaper Today" experiment tested if knowing future news predicts market profits.
- Despite having future economic headlines, most participants lost money due to poor bet sizing.
Position Sizing Beats Selection
- Position sizing is more critical than choosing what to invest in because it prevents bankruptcy.
- You don't need to outperform others in sizing; it's a personal risk management decision.
Merton Formula on Optimal Sizing
- The Merton share formula guides how much to allocate based on expected return, variance, and risk aversion.
- Even a strategy that can lose all money sometimes should be sized optimally, not simply abandoned.
